–National Govts, EU Parliament Still Disagree On Key Issues

By Emma Charlton

BRUSSELS (MNI) – European policymakers are racing to agree on a new
European financial supervision package this week with compromise yet to
be reached on several key issues, including the scope of new
pan-European regulators and the role played by the president of the
European Central Bank.

The aim is for three new pan-European supervisory bodies to be up
and running at the start of next year, but disagreement between the
European Council, which represents the EU’s 27 member states at
government level, and the European Parliament, made up of elected
members, is slowing the process and putting the planned time line at
risk.

Central to the debate is how much national power should be ceded to
the new supervisors.

“We are very close to a deal but things remain fragile,” a European
Commission source said on Monday. “This package does not change the
rules per-say; it creates an infrastructure to make sure that the rules
are better applied.”

“It is really technically feasible, I think it is within reach, but
I am not saying it is going to happen for sure,” the source added. “That
will depend on the clever compromises and the will of certain
delegations.”

EU diplomats hope a deal can be agreed over the summer, paving the
way for an affirmative vote in the European Parliament in September,
which would keep the time line on track. But the European institutions’
annual summer break, which has already started and lasts for most of
August, poses an additional risk to the time line.

“We need to set up the new authorities in January 2011; this has
been requested by head of states at their last meeting,” one source
noted.

One of the key sticking points is the formation of the new European
Systemic Risk Board, or ESRB, which would monitor potential risks to
financial stability in the EU and issue recommendations.

“In the current Council text it is said that the chair of the ESRB
should be elected by the board of the ESRB,” an EU source said.

“The parliament sticks to its view that the President of the
European Central Bank should be the chairman of the ESRB, ex-officio,”
he added.

The other points of departure are largely symbolic, though
politically difficult issues, which relate to the will of national
governments to cede power to Europe.

The first is the amount of direct supervisory power to be vested in
the new pan-European authorities. National governments want to eliminate
a clause that would allow all supervisory power to be transferred to the
new regulators in the future, while parliament wants to keep that
clause.

“This is a hot topic, but it’s largely a symbolic issue,” an EU
source said.

Council and Parliament are also split over the extent of the power
that the new institutions should have to make direct decisions in
emergency situations and their scope in mediating between two national
supervisors that disagree.

“The Council does not want to give a blank cheque to the new
authorities to settle any dispute that may arise,” the source said.

Parliament also wants to have the power to declare an emergency
situation itself, a proposal that sits uneasily with national finance
ministries, who don’t see parliamentarians as adequately qualified.

The European Union, which is keen to be seen as leading the way
internationally on financial reform, is also mindful that the US is
proceeding at pace with its own financial reform package.

“The US and the EU are implementing a G20 agreement to improve
financial supervision in different ways,” a European Commission source
said.

“In the US they are close to agreement on one major law, covering
all sectors, but of course this will have to be followed by a high
number of implementing laws,” he added. “In the EU we agree texts sector
by sector or issue by issue, so it’s a bit difficult to compare.”

–Brussels: 0032 487 (0) 32 803 665, echarlton@marketnews.com

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